Question #9
Reading: Reading 1 Multiple Regression
PDF File: Reading 1 Multiple Regression.pdf
Page: 4
Status: Unattempted
Correct Answer: B
Question
One possible problem that could jeopardize the validity of the employment growth rate model is multicollinearity. Which of the following would most likely suggest the existence of multicollinearity?
Answer Choices:
A. The variance of the observations has increased over time
B. The Durbin–Watson statistic is significant
C. The F-statistic suggests that the overall regression is significant, however the regression coefficients are not individually significant
Explanation
One symptom of multicollinearity is that the regression coefficients may not be
individually statistically significant even when according to the F-statistic the overall
regression is significant. The problem of multicollinearity involves the existence of high
correlation between two or more independent variables. Clearly, as service employment
rises, construction employment must rise to facilitate the growth in these sectors.
Alternatively, as manufacturing employment rises, the service sector must grow to serve
the broader manufacturing sector.
The variance of observations suggests the possible existence of heteroskedasticity.
If the Durbin–Watson statistic may be used to test for serial correlation at a single
lag.